How to Start a Business as a Stay-At-Home Mom – Part II, The Legalities

Last week, I gave you a framework for starting your business as a stay-at-home mom. While I was writing that blog, I realized that there are a lot of legal and financial aspects that need to be covered.

Those are the steps that could get you into the most trouble, and they are often the most challenging. I decided to write this second blog so I could really drill down and get specific about these steps.

I’m going to throw a caveat in here and say sure, it’s possible for you to skip steps and just do your thing. But at the very least, you should be aware of the requirements. And if you want to have a legit business and head off potential problems, you want to seriously consider each of these.

Let’s get right to it.

Business type

After you have picked your name, and verified that it is available for usage, you need to figure out your business structure. This may seem complicated, but if you address it at the outset, you’ll save yourself a lot of hassle later.

Choosing the type of business entity you will become has direct bearing on how you will be taxed and what your legal liabilities are in the future. If you are unsure of what is best, this would be a good time to consult with an attorney or at the very least do extensive research to choose the right entity.

To be clear, this is where you decide if you are a sole proprietor, partner with other people, a limited liability corporation (LLC) or a corporation.


The entity you choose in the above step will determine whether or not you need to register your business. This is a legal issue and cannot be avoided. Generally speaking, if you choose LLC or a corporation, you need to register. Sole proprietorships or general partnerships usually do not have to register.

To receive information that might be unique to your state’s requirements, contact your local Secretary of State or business bureau. They’ll be able to give you more specific information.


Even if you don’t have to register with your state, you should still consider registering with the federal government and applying for an employee identification number (EIN). This number can ease a little of the red tape that involves bank accounts, filing taxes and much more. You can check the IRS website for more information.


After you have completed the steps for registration at federal and state agencies, you should apply for a license. Again, the requirements for this are state-specific. But to operate a business legally, you at least need a home occupation permit.

If you’re offering a service that will require people to come to your house, there may be zoning or property use considerations in addition to general business licenses and permits. Yes, it is a lot of red tape. But if you want to be legal, you have to jump through the hoops.

As an example, California requires people who own rental properties to have a business license – and they are charged licensing fees on top of that. With the world the way it is, you need to protect yourself and your business.

Which leads me to the next step.


Separate them. Immediately. As a small-business owner, you are responsible for your business debts and liabilities, especially at the beginning. You do not want those mixed up with your personal finances. If the worst should happen, and you need to pay restitution or have legal issues, your family should remain protected.

Bank account

Use the aforementioned EIN to open a business bank account. This is the easiest way to separate your finances. Several banks also have perks that go with a business account.

Credit card

Just like a personal credit card, a business credit card can establish your business and give you a possible layer of protection. Most banks offer business credit cards, but do your research to find one that will give you incentives in return.

Once you have the above information in hand, consider choosing a card that will be easy to use with your business bank account. It will make for more seamless transactions.


You may have your personal finances under control, but businesses can be a totally different animal. Research accounting software or websites. Not only will automating your finances be easier in the long run, having a program doing the work will allow you to concentrate on building the business instead of worrying about bookkeeping.


Depending on the type of business you are opening, you may be lucky enough to have little or no start up costs. That is obviously ideal. But it is also possible to have an initial output.

Again, depending on your business and the product or service you are offering, you have a variety of options for funding. You can consider a business loan if you require a large amount of money. For smaller start-up costs, you can talk with family or friends, or even look into crowdfunding possibilities.

Legal matters

I know this sort of takes the fun and excitement out of starting a business, because it seems like a lot of headaches. But if you have a passion and truly want to make a go of it, these steps will build a solid foundation that can help you build the business in a legal and financially sound manner.

Ultimately, you have to make some tough decisions, but don’t let some red tape dissuade you from a dream business. Do your research and give it a try!

For more information about what I do, or if you are interested in coaching, or working with me to develop your business plan, CLICK HERE to chat with me.